3014iba - NHL Lockout Report

National Hockey League 2012-2013
Lockout Negotiation
3014IBA: International Business Negotiation
Group Two,
Secretary: mitchell.merritt@griffithuni.edu.au
8th October, 2014
Word Count: 2200
2012-2013 NHL Lockout Negotiation
Group 2
Table of Contents
Nomenclature:....................................................................................................... 1
Case Study: NHL Lockout 2012-2013..........................................................................1
Introduction:.......................................................................................................... 1
Background prior to 2012-2013 negotiation................................................................2
Commencement of formal negotiations.....................................................................3
CBA expires and lockout commences (16/9/12 to 16/11/12)......................................3
Influence of mediation (17/11/12 to 6/1/13).............................................................4
Resolution of CBA: Lockout concludes (12/1/13)........................................................5
Outcome of negotiation: Collective Bargaining Agreement...........................................5
Conclusion............................................................................................................ 7
Appendices.............................................................................................................. 7
APPENDIX A - TIMELINE OF NEGOTIATION............................................................7
APPENDIX B SUMMARY OF NEGOTIATION OUTCOME........................................9
APPENDIX C KEY PARTIES OF NEGOTIATION...................................................10
Reference List........................................................................................................ 12
Nomenclature:
National Hockey League = NHL

National Hockey League Players Association= NHLPA
Lockout = legal exclusion of employees by their employer from their place of work
until certain terms are agreed to
Collective Bargaining Agreement = CBA
Hockey Related Revenue = HRR
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Case Study: NHL Lockout 2012-2013

Introduction:
The National Hockey League in 2012 implemented industrial action in the form of a total
player lockout due to an inability of the NHL and NHLPA to reach agreement to a new
collective bargaining agreement. This lockout took place between June 2012 and January
2013 totalling 113 days (Kobritz, J. Levine, J. 2013). The purpose of this report is to select
and analyse this negotiation in particular the methods and strategy implemented by the key
parties, whilst also discussing the important issues and potential methods for a better
negotiation structure.
Background prior to 2012-2013 negotiation

The 2012-2013 Lockout was triggered by disagreement between the NHL commission and
NHLPA surrounding the equality of revenue distribution in the new CBA (Brehm, 2012;
Cowan, 2012). Unlike prior negotiations which were centred on the issue of introducing a
limit on total player earnings (salary cap), the 2012-2013 lockout was primarily focused on
the issue of distribution of hockey related revenue (HRR) (Jones, 2012).
Despite a
substantial increase in revenue from $2.2B in 2005 to 3.3B in 2012 (Fitzpatrick, 2014), and a
relatively modest increase in player average salaries from $1.46M to $2.17M (Fitzpatrick,
2012) across the same period of time, the NHL commission sought additional concessions
from the NHLPA to reduce their distribution of revenue (CBC, 2012; Fitzpatrick, 2012).
Prior to 2012, an established history of recurring industrial relations disputes characterised
the NHL administration (Kobritz & Levine, 2013). This is evidenced by three prior industrial
relations disputes including the 1992 player strike, 1994-1995 lockout, and 2004-2005
lockout (Lind, 2012). Thus, a significant precedent of hardball negotiation strategies between
the NHLPA and NHL Commission has shaped a highly volatile bargaining environment.
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Key parties in the 2012-2013 lockout negotiation held significant influence over the
negotiations of prior major negotiations within North American professional sporting
landscape. Prior to the 2012 player lockout, Gary Bettman (NHL Commissioner) had
presided over three similar lockouts. One caused the cancellation of the entire 2004-05
season, another led to a 48-game season in 1995. Overall 2,208 games have been lost due
to labour disputes during Bettmans time as commissioner (Fitzpatrick, 2014). Similarly, the
Executive Director of the NHLPA negotiation party, Donald Fehr, has significant involvement
with negotiation of major Collective Bargaining Agreements. Prior to joining the NHLPA, Fehr
acted as head of the Major League Baseball Players Association (MLBPA) from 1986 to
2009, in that time Fehr successfully negotiated for significant advances in player
entitlements (Fitzpatrick, 2014). Fehr also bargained for a system where teams can spend
as much as they want on players and facilities. He also helped achieve an equalisation
system in MLB whereby the league distributed revenue from high earning team to assist new
or low profile teams.
Commencement of formal negotiations

Most important issues: How the revenue would be split up between the players and
owners. HARRISON 300 to 400 words approx. required
CBA expires and lockout commences (16/9/12 to 16/11/12)

With an absence of a current CBA in place following the expiration of the 2005 CBA, the
NHL commission met with team owners and agreed unanimously to initiate a lockout
(Cohen, 2012; Johnston, 2012; Hughes, 2012). Without a current agreement in place to
govern industrial relations, the NHL entered a period of indefinite hiatus (Fontana, 2012).
The lockout immediately restricted NHL players from all forms of employment with all NHL
franchises (including training facilities and franchise staff) until a new collective bargaining
agreement could be settled (Callahan, 2012).
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In an effort to centralise the bargaining process four key people were appointed to represent
the parties (Gulitti, 2012). The NHL commission was represented by Gary Bettman
(Commissioner) and Bill Daly (Deputy Commissioner), while the NHLPA was represented by,
Donald Fehr (Executive Director) and Steve Fehr (Special Counsel) (Fontana, 2012; Arthur,
2012). The core issues surrounding the negotiation of the new CBA centred on the
distribution of HRR (Hockey Related Revenue) (Harvard Business Review, 2012). Under the
framing of the initial NHL proposal the commission sought to engage in concessionary
bargaining to reduce players salaries by 14%, to a reduced figure of 43% of HRR (Sukumar,
2012). Despite substantial growth of NHL revenues of over 50% ($3 Billion) since 2005
(Elliot, 2012), the proposed reduction in player revenue represented a reduced distribution of
the prior agreement which entitled players to access of 57% of total HRR.
Donald Fehr countered the NHL proposal with three integrative bargaining strategies, all of
which were denied by Bettman (Allen, Elliot). Fehrs proposals centred on engaging
partnerships between top revenue earning clubs and the leagues less financial franchises
which would create greater stability for the competition and expand the revenue pie to
enable both parties to achieve their financial objectives (Russo, 2012). In response to a
strong position from the top five franchise owners that they would not be interested in
creating a system of which would essentially subsidise additional teams, in less than one
hour of formal review, Daly announced that these proposals were declined (AP Online,
2012).
After over six months negotiations and over 510 fixtures cancelled including the signature
Winter Classic, no significant progress had been made on the economic framework
required to end the lockout (Callahan, K; Wyshynski 2012; Klein, 2012). With significant time
and public pressure points causing significant damage to the NHL product the longer the
negotiation process endured (Tait, 2012;Ross, K; Neale, 2012), Bettman and Fehr
announced that the respective parties would engage independent federal mediation (Vint,
2012).
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Influence of mediation (17/11/12 to 6/1/13)

Recognising the involvement of personal motivations and emotions had influenced prior
negotiations between Bettman and Fehr, the Federal Mediation and Conciliation Service
assigned three mediators to help resolve an agreement which would end the negotiation
(Podell, 2012; Allen, 2012).
Alternative strategies were employed throughout negotiations (Anderson, 2012; LeBrun,
2012). On December 4th, 2012, 18 players and six team owners engaged in over 12 hours of
consecutive collective bargaining sessions, without Bettman or Fehr present in the hope that
a new representation dynamic would progress negotiations (Baert, 2013; Gheciu, 2013).
Following these negotiations, a new proposal was put forward by the NHLPA on December
6th; however, NHL rejected the player generated offer and suspended negotiations
(Boudway, 2013). Consequently, negotiations did not resume mediation conditions were
agreed to, with future negotiation mediated by federal mediators Scott and John (Johnston,
2012).
Resolution of CBA: Lockout concludes (12/1/13)

Seeking an alternate source of power, the NHL filed a class action complaint in U.S Federal
Court seeking a declaration wishing to confirm the ongoing legality of the lockout (Carrera,
2012; Clarke, 2013).
This class action complaint was unsuccessful and negotiations
continued under mediation as the NHL announced further cancellation of fixtures with over
50% of the season now lost (Luxen & Gheciu, 2013). Respective parties then shuffled back
and forth over five consecutive days of negotiations with neither party offering concessions
(Podell, 2012; Luxen & Gheciu, 2013; Fish, 2012).
Recognising significant external pressure from the public and stakeholders, the NHL
conceded with another counter offer more accommodating of key elements of NHLPAs
proposed agreement (Ralph, 2013; Pingue, 2013). On January 6th, following a 16 hour
negotiation, agreement was established over the economic structure of the new CBA
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pending minor concessions (Reynolds, 2013; NHL/NHLPA CBA, 2013). After 113 days of
prolonged and public negotiations (Fox, 2013;CBS, 2013), January 12 th marked the day that
the NHLPA and NHL commission formally signed the new CBA and thus ended the 2012-13
NHL lockout (Brehm, Allen 2013).
Outcome of negotiation: Collective Bargaining

Agreement
Following 113 days of negotiations and striking, the lockout came to an end and with a ten
year CBA agreement with an opt-out clause after eight years, essentially ensuring no more
lockouts until at least 2020 (Huffington Post, 2014; Fitzpatrick, 2014; Gelston, 2013; Smith,
2013; Peace in our time, 2013) The terms of the CBA agreement were a vital issue as all
parties did not want to go through another lockout (Allen, 2013). Some of the most
significant terms of the CBA agreement by NHL and NHLPA are as follows:
An even split of 50-50 in profitability between players and owners (Huffington Post, 2014;
Garrioch, 2013; Fitzpatrick, 2014; Halford, 2013; Staudohar, 2013; Smith, 2013).
Player contracts were restricted to 7 years, or 8 if under a current contract (Allen, 2013;
Guarino, 2013).
The clubs salaries are now capped at $64.3 million (Staudohar, 2013; Halford, 2013). This is
a decrease from the previously agreed $70.2 million (Peace in our time, 2013).
Players pensions were one of the main achievements for the NHLPA as they walked out of
the negotiation with players now being able to put money into their own pensions and the
NHL is responsible for any losses in the fund (Halford, 2013; Allen, 2013).
Players can now be fined up to $10K for a disciplinary issue. Subsequent infractions can
result in a fine up to $15K.
In addition to this, they agreed to play the remaining games of the season, meaning the
season that was meant to start on October 11, began January 19 and allowed for 48-50
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games to be played (Peace in our time, 2013; Guarino, 2013; Tuttle, 2013; Badenhausen,
2013).
The effects of the lockout spread further than just the NHL and NHLPA as fans and
businesses were also affected (Burton & OReilly, 2013). Three lockouts over two decades
created doubt in the minds of the players and the owners over the sustainability of the sport
and whether or not fans would return (Staudohar, 2013, Burton & OReilly, 2013). However,
many of the fans returned with the same enthusiasm and were just grateful to have the sport
that they love return (Fox, 2013). Other fans were not as understanding and saw the lockout
as pointless (Springer, 2013). Many businesses in hospitality and retail were influenced to
close due to the lack of hockey related business (Garrioch, 2013) After the announcement
that the season would return, businesses were ecstatic as it meant that they would finally
trade at regular volume (Gelston, 2014; Fox, 2013).
Conclusion
After 113 days of negotiations, the NHL and NHLPA reached a ten year agreement. The NHL
began discussions with NHLPA in January of 2012, However; Donald Fehr claimed a lack of
preparedness at the time which resulted in the lockout when the matter was not discussed
by October 11, when the season was supposed to start (Le Brun, 2012).Throughout the
negotiation there was lack of preparedness from both parties as they had a distributive
bargaining approach which resulted in time consuming meetings and discussions that were
not accomplishing anything. In the final stages of the negotiation, both parties had direction
and clarity about what they wanted and approached the situation with a more integrative
approach which resulted in a better outcome. Although the lockout ended with an
agreement, many sources suggest that another lockout will occur in 2021 under the opt-out
clause (Peace in our time, 2013)
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Appendices
APPENDIX A - TIMELINE OF NEGOTIATION
JUNE 29 BARGAINING BEGINS.
Management initial proposal would reduce players share of hockey related revenue from 57
% to 46 %.
AUG. 14 PLAYERS MAKE FIRST PROPOSAL: CALLING FOR LOWER %AGE OF
REVENUE FOR PLAYERS AND INCREASED REVENUE SHARING
Aug. 15 NHL rejects players' offer.
Aug. 28 Owners offer players 46 %.
Sept. 12 Players make proposal, which is immediately rejected.
Sept. 13 Owners meet in New York and unanimously endorse decision to lock out players
when the 2005-12 collective bargaining agreement expires at the end of Sept. 15.
SEPT. 16 LOCKOUT BEGINS
Sept. 19 NHL cancels preseason schedule through Sept. 30.
Sept. 22 NHL fines Detroit Red Wings undisclosed amount for comments made by senior
vice president Jim Devellano in an interview with Island Sports News, which quoted him as
saying his solution to end the lockout would be to have the players take 43 % and the
owners get 57 % of hockey-related revenue. Sept. 27 NHL cancels remainder of
preseason schedule.
Oct. 4 NHL cancels 82 games from Oct. 11-24.
OCT. 16 LEAGUE MAKES PROPOSAL,
Offering to split hockey related revenue 50-50, and says it must be accepted by Oct. 25 to
preserve full schedule.
OCT. 17 UNION REJECTS PROPOSAL.
Oct. 19 NHL cancels games through Nov. 1, raising cancellations to 135 (11 % of season).
Oct. 26 NHL cancels games through Nov. 30, raising total to 326 (26.5 %).
Nov. 2 NHL cancels Jan. 1 Winter Classic between Toronto and Detroit at Ann Arbor,
Michigan
NOV. 21 UNION MAKES PROPOSAL OFFERING TO SPLIT HOCKEY-RELATED
REVENUE 50-50 WITH
$392 million "make-whole provision" for existing contracts that is $182 million more than
management's offer. NHL Commissioner Gary Between says sides are "far apart."
Nov. 23 NHL cancels games through Dec. 14, raising total to 422 (34 % of season), and
All-Star weekend for Jan. 26-27 at Columbus, Ohio.
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NOV. 28-29 THE SIDES MEET WITH TWO MEMBERS OF THE FEDERAL MEDIATION
AND CONCILIATION SERVICE, WHO AGREE THEY ARE FAR APART.
Dec. 10 NHL cancels games through Dec. 30, raising total to 526 (43 % of season).
Dec. 14 A day after negotiations break off, NHL files a class action suit against the union in
U.S. District Court in New York, seeking to establish its lockout is legal, and files an unfair
lab or practice charge with the National Labour Relations Board, claiming the union has
bargained in bad faith.
Dec. 20 NHL cancels games through Jan. 14, raising total to 625 (51% of season).
DEC. 27 NHL MAKES NEW PROPOSAL.
Dec. 31 Negotiations resume.
Jan. 4 Federal mediator Scot Beckenbaugh shuttles between the sides.
Jan. 6 RESOLUTION OF NEGOTIATION: On the 113th day of the lockout, the sides reach
agreement on a 10-year contract that either side can terminate after eight years. Hockeyrelated income will be split 50-50. Free-agent contracts will be limited to a maximum seven
years (eight for clubs to re-sign their own players). Salaries in contracts can't vary more than
35% year to year, and the final year can't be more than 50 % of the highest year. The salary
cap for the upcoming season will be $70.2 million, and it will go down to $64.3 million in
2013-14.
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APPENDIX B SUMMARY OF NEGOTIATION

OUTCOME
NHL/NHLPA CBA Summary 2013
The tentative agreement is a 10-year deal with a mutual opt-out clause after 8 years.
It expires in the 2021/2022 season.
Revenues will be split 50-50 between players and NHL owners.
Contract terms are limited to 7 years for new players, and eight years if a team is resigning a player.
Players will receive their own hotel room when travelling after they are signed for a
second contract.
The total teams salaries will be capped at $64.3 million for the 2013-2014 season,
however; during teams can spend up to $70.2 million in the transitioning period.
o The payroll floor will be $44 million.
o Salary variances are capped at 35% from year to year and the lowest years
salary cannot have a variance of 50% from the highest salary.
o Teams will have two compliance buyouts to use after this season and the
2013-2014 seasons.
Re-entry waivers have been eliminated. Therefore teams cannot claim players from
the AHL and must now adhere to the normal waiver process.
The minimum NHL salary will rise from $525,000 to $650,000 by 2017-2018. By the
end of the agreement it will be $750,000.
Each team is required, at the request of the NHL, to participate in one international
game during the new 10-year CBA agreement.
Supplementary discipline resulting in fines will increase to a maximum of $10,000 for
the first offence and up to $15,000 for each and every one after that. Players who are
suspended for 6 or more games can appeal the suspension and a neutral third party
will be involved.
Initiating in the 2013-2014 season, teams must schedule 6-8 preseason games.
Random drug testing will take place during training, regular seasons, playoffs, and
off-seasons.
Players are now able to make contributions to their pension funds and if there are
any losses, the NHL is responsible for the funds.
Sources:
Carrera, K. (2013, January 14). The NHL CBA: Analyzing whats new. The Washington Post.
Retrieved from http://www.washingtonpost.com/wp-srv/sports/capitals/2013/cba/
Lebrun, P. (2013, January 6). Breaking down the NHLs new CBA. ESPN. Received from
http://espn.go.com/blog/nhl/post/_/id/21176/breaking-down-the-nhls-new-cba
Rishe, P. (2013, January 6). NHL Owners, Players Score New CBA Saving the 2012-2013
Hockey Season. Forbes. Retrieved from http://www.forbes.com/sites/prishe/2014/10/04/iocmust-change-selection-criteria-when-choosing-olympic-host-cities/
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APPENDIX C KEY PARTIES OF NEGOTIATION

Parties in the negotiation
<<insert details about direct actors, opposition actors, indirect actors, interested
observers and environmental factors >>
Direct Actors
<<insert>>
Opposition Actors
<<insert>>
Indirect Actors
<<insert>>
Interested Observers
<<insert>>
Environmental Factors
<<insert>>
Key Players within the negotiation:

Donald Fehr NHLPA: Represented the players side in the
negotiation(Executive Director)
Garry Bettman: Represented the owners side in the negotiation (NHL
commissioner)
-
Scot Beckenbaugh US Federal Mediator (Head Mediator)
John Sweeny (2nd Mediator)
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These were the parties that negotiated when Donald Fehr and Garry Bettman
removed themselves from the negotiation in an effort to reach a solution.
-
Bill Daly (Deputy Commissioner)
Steve Fehr (NHLPA Special Counsel)
Hockey Club Owners (6)
Hockey Players (18)
Chief Negotiators:
NHL- Commissioner Gary Bettman

NHLPA- Executive Director Donald Fehr
Secondary Negotiators:
NHL- Deputy Commissioner Bill Daly

NHLPA- Steve Fehr
KEY PLAYERS,
-
Donald Fehr NHLPA (Executive Director)
Garry Bettman (NHL commissioner)
Scot Beckenbaugh US Federal Mediator (Head Mediator)
John Sweeny (2nd Mediator)
Bill Daly (Deputy Commissioner)
Steve Fehr (NHLPA Special Counsel)
Hockey Club Owners (6)
Hockey Players (18)
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Reference List
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National Hockey League 2012-2013

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2012-2013 NHL Lockout Negotiation

National Hockey League = NHL

2012-2013 NHL Lockout Negotiation

Case Study: NHL Lockout 2012-2013

Background prior to 2012-2013 negotiation

2012-2013 NHL Lockout Negotiation

Commencement of formal negotiations

CBA expires and lockout commences (16/9/12 to 16/11/12)

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

Influence of mediation (17/11/12 to 6/1/13)

Resolution of CBA: Lockout concludes (12/1/13)

This class action complaint was unsuccessful and negotiations

2012-2013 NHL Lockout Negotiation

Outcome of negotiation: Collective Bargaining

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

APPENDIX B SUMMARY OF NEGOTIATION

2012-2013 NHL Lockout Negotiation

APPENDIX C KEY PARTIES OF NEGOTIATION

Key Players within the negotiation:

Scot Beckenbaugh US Federal Mediator (Head Mediator)

John Sweeny (2nd Mediator)

2012-2013 NHL Lockout Negotiation

Bill Daly (Deputy Commissioner)

Steve Fehr (NHLPA Special Counsel)

Hockey Club Owners (6)

Hockey Players (18)

NHL- Commissioner Gary Bettman

NHL- Deputy Commissioner Bill Daly

Donald Fehr NHLPA (Executive Director)

Garry Bettman (NHL commissioner)

Scot Beckenbaugh US Federal Mediator (Head Mediator)

John Sweeny (2nd Mediator)

Bill Daly (Deputy Commissioner)

Steve Fehr (NHLPA Special Counsel)

Hockey Club Owners (6)

Hockey Players (18)

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

2012-2013 NHL Lockout Negotiation

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